Spain: Biggest VAT Increase in the World is Still Below Average

February 6th, 2013

According to a recent study published by the consulting firm, KPMG, Spain was the country in the world which registered the largest increase in VAT in 2012, after a rise of three points in the standard rate (to 21%) came into force on 1st September last year.

The report notes that, despite the increase in VAT, Spain is still below the average standard rate of the European Union (EU), which stands at 21.13%.

The tax burden increased on consumption but not on company profits. Spain did not change the standard rate of corporation tax in 2012, which has stood at 30% since 2008, the year in which it dropped by 2.5 points.

The largest VAT increases in 2012, other than Spain, were registered in Hungary (from 25% to 27%), Ireland (from 21% to 23%), the Netherlands (from 19% to 21%) and Serbia (from 18% to 20%).

On the other hand, El Mundo reported that the country which lowered its standard VAT rate most was Greece (from 23% to 20%).

KPMG noted that apart from raising the standard VAT rate last year, Spain also increased the reduced rate from 8% to 10%, and cut the number of products and services to which the reduced rate applies, which are now taxed at the standard rate.

At the close of 2012, the highest standard VAT rates were those registered in Hungary (27%), Iceland (25.5%), and Sweden, Denmark, Norway and Croatia (all with 25%).

The lowest rates were registered in the Caribbean island of Aruba (Netherlands Antilles), which applied a VAT or a tax on turnover of 1.5%, followed by a number of countries where the rate of VAT or goods and services tax was 5%, such as Japan, Canada, the Yemen and Nigeria.

KPMG’s expert, Celso García Granda, predicts that this year indirect taxes are likely to be increased, because more and more governments are opting for this in order to boost their incomes and start economic recovery.

Corporate Tax

The standard rate of corporation tax in Spain (30%) is above the general average, such as the OECD rate (25.25%) and that of the European Union (22.6%). However, it must be borne in mind that companies can be taxed less than 30% by means of deductions.

Israel was the only country to increase its standard rate, from 24% to 25%.

At the opposite end, the countries which dropped the corporation tax rate most were Sri Lanka (from 35% to 28%) and Thailand (30% to 23%).

Last year, the United Arab Emirates had the highest corporate tax in the world (55%), followed by the United States (40%) and Japan (38.01%).

Montenegro was the country that applied the lowest rate (9%), while in Serbia, Cyprus, Paraguay and Qatar it was 10%.